6.9: Key Terms
- Page ID
- 94619
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\(\newcommand{\avec}{\mathbf a}\) \(\newcommand{\bvec}{\mathbf b}\) \(\newcommand{\cvec}{\mathbf c}\) \(\newcommand{\dvec}{\mathbf d}\) \(\newcommand{\dtil}{\widetilde{\mathbf d}}\) \(\newcommand{\evec}{\mathbf e}\) \(\newcommand{\fvec}{\mathbf f}\) \(\newcommand{\nvec}{\mathbf n}\) \(\newcommand{\pvec}{\mathbf p}\) \(\newcommand{\qvec}{\mathbf q}\) \(\newcommand{\svec}{\mathbf s}\) \(\newcommand{\tvec}{\mathbf t}\) \(\newcommand{\uvec}{\mathbf u}\) \(\newcommand{\vvec}{\mathbf v}\) \(\newcommand{\wvec}{\mathbf w}\) \(\newcommand{\xvec}{\mathbf x}\) \(\newcommand{\yvec}{\mathbf y}\) \(\newcommand{\zvec}{\mathbf z}\) \(\newcommand{\rvec}{\mathbf r}\) \(\newcommand{\mvec}{\mathbf m}\) \(\newcommand{\zerovec}{\mathbf 0}\) \(\newcommand{\onevec}{\mathbf 1}\) \(\newcommand{\real}{\mathbb R}\) \(\newcommand{\twovec}[2]{\left[\begin{array}{r}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\ctwovec}[2]{\left[\begin{array}{c}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\threevec}[3]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\cthreevec}[3]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\fourvec}[4]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\cfourvec}[4]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\fivevec}[5]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\cfivevec}[5]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\mattwo}[4]{\left[\begin{array}{rr}#1 \amp #2 \\ #3 \amp #4 \\ \end{array}\right]}\) \(\newcommand{\laspan}[1]{\text{Span}\{#1\}}\) \(\newcommand{\bcal}{\cal B}\) \(\newcommand{\ccal}{\cal C}\) \(\newcommand{\scal}{\cal S}\) \(\newcommand{\wcal}{\cal W}\) \(\newcommand{\ecal}{\cal E}\) \(\newcommand{\coords}[2]{\left\{#1\right\}_{#2}}\) \(\newcommand{\gray}[1]{\color{gray}{#1}}\) \(\newcommand{\lgray}[1]{\color{lightgray}{#1}}\) \(\newcommand{\rank}{\operatorname{rank}}\) \(\newcommand{\row}{\text{Row}}\) \(\newcommand{\col}{\text{Col}}\) \(\renewcommand{\row}{\text{Row}}\) \(\newcommand{\nul}{\text{Nul}}\) \(\newcommand{\var}{\text{Var}}\) \(\newcommand{\corr}{\text{corr}}\) \(\newcommand{\len}[1]{\left|#1\right|}\) \(\newcommand{\bbar}{\overline{\bvec}}\) \(\newcommand{\bhat}{\widehat{\bvec}}\) \(\newcommand{\bperp}{\bvec^\perp}\) \(\newcommand{\xhat}{\widehat{\xvec}}\) \(\newcommand{\vhat}{\widehat{\vvec}}\) \(\newcommand{\uhat}{\widehat{\uvec}}\) \(\newcommand{\what}{\widehat{\wvec}}\) \(\newcommand{\Sighat}{\widehat{\Sigma}}\) \(\newcommand{\lt}{<}\) \(\newcommand{\gt}{>}\) \(\newcommand{\amp}{&}\) \(\definecolor{fillinmathshade}{gray}{0.9}\)- accounts receivable turnover ratio
- measures how many times in a period (usually a year) a company will collect cash from accounts receivable
- book value per share
- total book value (assets – liabilities) of a firm expressed on a per-share basis
- cash ratio
- represents the firm’s cash and cash equivalents divided by current liabilities; often used by investors and lender to asses an organization’s liquidity
- current ratio
- current assets divided by current liabilities; used to determine a company’s liquidity (ability to meet short-term obligations)
- days’ sales in inventory
- the number of days it takes a company to turn inventory into sales
- debt-to-assets ratio
- measures the portion of debt used by a company relative to the amount of assets
- debt-to-equity ratio
- measures the portion of debt used by a company relative to the amount of stockholders’ equity
- DuPont method
- framework for financial analysis that breaks return on equity down into smaller elements
- earnings per share (EPS)
- measures the portion of a corporation’s profit allocated to each outstanding share of common stock
- efficiency ratios
- ratios that show how well a company uses and manages its assets
- inventory turnover
- measures the number of times an average quantity of inventory was bought and sold during the period
- liquidity
- ability to convert assets into cash in order to meet primarily short-term cash needs or emergencies
- market value ratios
- measures used to assess a firm’s overall market price
- operating cycle
- amount of time it takes a company to use its cash to provide a product or service and collect payment from the customer
- price/earnings (P/E) ratio
- company’s stock price divided by the company’s earnings per share; indicates the amount investors are willing to pay for one dollar of earnings
- profit margin
- represents how much of sales revenue has translated into income
- quick ratio
- also known as the acid test ratio; ratio used to determine a firm’s ability to pay short-term debts using its most liquid assets
- return on equity
- measures the company’s ability to use its invested capital to generate income
- return on total assets
- measures the company’s ability to use its assets successfully to generate a profit
- solvency
- implies that a company can meet its long-term obligations and will likely stay in business in the future
- times interest earned (TIE) ratio
- measures the company’s ability to pay interest expense on long-term debt incurred
- total asset turnover
- measures the ability of a company to use its assets to generate revenues